Is Health Spending Excessive? If So, What Can We Do About It?

ABSTRACT

The case that the United States spends more than is optimal on health care is overwhelming. But identifying reasons for excessive spending is not the same as showing how to wring it out in ways that increase welfare. To lower spending without lowering net welfare, it is necessary to identify what procedures are effective at reasonable cost, to develop protocols that enable providers to identify in advance patients in whom expected benefits of treatment are lower than costs, to design incentives that encourage providers to act on those protocols, and to provide research support to maintain the flow of beneficial innovations.